Cleveland-Cliffs (NYSE:CLF) stock rose 4.99% (As on January 12, 12:09:29 AM UTC-4, Source: Google Finance) after Morgan Stanley upgraded the steel producer to ‘overweight’ from ‘equal weight’. Adjusts Price Target to $26 From $13.60. “We believe the recently announced increase in fixed annual steel price contracts should allow CLF to cope with lower forecast spot steel prices and generate robust FCF yields in the coming years as the company has no major planned capital expenditures,” analyst Carlos De Alba wrote in a note.
Late in 2022, the company made news when it affirmed that, with a large portion of its fixed price contractual volumes already renewed in its most recent negotiating cycles, Cliffs will achieve higher annual fixed prices for steel in the calendar year 2023 compared to 2022. These improved annual fixed prices are independent of the Company’s recently announced price increases on spot steel sales.
Specifically, with higher sales volumes and a similar mix of hot rolled, cold rolled and coated products, the Company expects from its direct carbon steel automotive customers an average selling price of approximately $1,400 per net ton in 2023, compared to an expected full-year 2022 price of approximately $1,300 per net ton. Direct carbon automotive sales represent Cliffs’ largest end market, are performed entirely on a fixed price basis, and are not influenced by spot prices.
Similarly, the Company has also achieved significantly higher contractual fixed prices for its grain-oriented electrical steels for 2023 compared to 2022, as well as meaningful increases in fixed base prices for its non-oriented electrical steel and stainless steel products, before surcharge impacts.
Meanwhile, third-quarter 2022 consolidated revenues were $5.7 billion, compared to the prior-year third-quarter revenues of $6.0 billion. For the third quarter of 2022, the Company recorded net income of $165 million, or $0.29 per diluted share attributable to Cliffs shareholders. In the prior-year third quarter, the Company recorded net income of $1.3 billion, or $2.33 per diluted share. In conjunction with its newly ratified labor agreements with the United Steelworkers, the Company has remeasured its associated pension/OPEB plan assets and obligations. Pro forma pension/OPEB liabilities, net of assets, were reduced by $1.8 billion, or 63%, since the last re-measurement on December 31, 2021. The reduction is due primarily to lower healthcare premiums negotiated separately from the labor agreements. Third-quarter 2022 Adjusted EBITDA was $452 million, compared to Adjusted EBITDA of $1.9 billion in the third quarter of 2021.